Piper Jaffray Reiterates Overweight Rating on CapitalSource (CSE)

Piper Jaffray is out with an analyst note this morning, where they reiterate their Overweight rating on shares of CapitalSource Inc.

; they have a $7.00 price target on the stock. Piper analysts said, “Several indicators are pointing to improved fundamentals in the commercial real estate (

) market. CRE prices have declined ~40% from their peak to pre-bubble levels where they have stabilized over the past few quarters according to the MIT Center for real estate.” They added, “CSE management has stated that it is seeing much more demand from buyers and completed several stressed property sales at prices at or above their marked values.” Specific to CSE, Piper analysts said, “Management has stated that it is seeing much more demand from buyers and has completed several stressed property sales at prices at or above their marked values. A large loan of about $75m in NY may get redeemed at par as an Abu Dhabi investor is funding the construction of the largest residential building in New York on land supported by the CSE loan.” They closed by saying, “We forecast CSE to have 25% equity at the end of 2012, when 10% would likely be sufficient. The two ways to correct this and raise ROE are to either repurchase shares or grow faster. Either way, there will be pent up earnings power above our forecast, due to the low leverage.”